Trading currencies on the foreign exchange is for qualified traders, right? Wrong.

Of course, the less you know, the more it is like gambling, red being buy and black being sell. Foolishly, I started a joint account with a friend, invested the minimum $250 in the morning, and went to lunch that same day with nothing. But before we’d lost our dough, we’d made a lot more. Undeterred, we went back in with the same investment and managed to extend our expulsion from the markets from three hours to three days. Three days, it must be said, doing very little apart from shouting “soar!” or “plummet!” at my computer screen and going to bed hoping there wouldn’t be any earthquakes in Japan. We were learning, but this was beginning to become an expensive crash course.

What we should really have been doing is studying the tendencies of the market with a demo account, available from all major Forex dealers as a means by which to acclimatise.
Demo accounts operate exactly as real accounts shall, only with the trial editions, users are allowed more capital with which to trade than an amateur investor might put down. More capital essentially means bigger margins, which means more room to manoeuvre, but even if it is monopoly money you’ll be making and losing, you’ll pick the basics up sooner than you think. A smallish deposit later and you’ll be trading away, but be warned: this is not for the faint hearted.

The attraction of online currency trading is the fact that your returns can be astronomical in comparison with, say, unit trusts. But as fast as you can make money you can lose it, as my intrepid colleague and I very bitterly discovered early on.

Our story, however, does have a happier ending; six months after our initial deposit we are beginning to treat the markets with a little more respect and we’re back in the black. We’ve done this largely by backing long term trends rather than attempting to cash in on short term fluctuations. It’s too early to propose any sort of compelling thesis, but it appears to be working and I’m far more fluent in a previously gibberish world of carry trades, SMTPs and futures. Also, and more to the point, I’m not waking up in the middle of the night in a cold sweat and shouting “plummet!” anymore.

For more information, go to www.forex.com

Jeremy Stevens